Unit 1 review

Question 1

what is the most important indicator an investor should consider when choosing a stock?

Answer 1

PE ration, market cap, beta, dividend

Question 2

The most popular and widely used measure of stock market performance on NY stock?

Answer 2

Dow Jones Industrial Average

Question 3

Define dividend

Answer 3

percent of money earned by shareholders

Question 4

What tends to be the safest type of investment

Answer 4

Savings account (or municipal bonds)

Question 5

Define liquidity

Answer 5

money you have access to (cash)

Question 6

Which component is worth the largest percentage of a person’s credit score?

Answer 6

Payment history (35%)

Question 7

3 ways to strengthen credit score

Answer 7

payment history, credit utilization, credit mix

Question 8

“pay yourself first”

Answer 8

put your money in savings first

Question 9

Should you assume more or less risk the older you get

Answer 9

less

Question 10

explain rule of 72

Answer 10

72 divided by interest rate to figure out how many years it will take to double your investment value.

Question 11

How does U.S. gov intervene in the economy?

Answer 11

protect, regulate, produce, consume

Question 12

why is competition the driving force in a market economy?

Answer 12

greater quality equals lower prices for consumers

Question 13

Importance of individual savings accounts in regards to overall health of economy

Answer 13

money is kept safe and you don’t have to rely on banks money

Question 14

Vertical merger vs horizontal merger

Answer 14

horizontal - sell similar products (airlines)
vertical - companies at different stages sell to a different company (Ebay merged with pay pal)

Question 15

What is a conglomerate

Answer 15

4 different businesses in 4 different sectors all under the same corporate (Walt Disney - Pixar, Disney, Lucas film, Marvel)

Question 16

Strengths & weaknesses of Sole Proprietorship

Answer 16

+ = you are boss, get all profits, easy to start
- = unlimited liability, limited life

Question 17

Strengths & weaknesses of a Corporation

Answer 17

+ = limited liability, unlimited life
- = difficult to start, double taxation, government regulation

Question 18

Define Voluntary Exchange

Answer 18

2 parties freely trade goods or services and both “win”

Question 19

3 economic questions

Answer 19

What to produce?
How to produce?
For whom to produce?

Question 20

4 characteristics of capitalism

Answer 20

Economic freedom, Voluntary exchange, Private property, Profit Motives

Question 21

The US has what type of economy?

Answer 21

Mixed Market

Question 22

What group decides what is produced in a mixed economy?

Answer 22

The people

Question 23

what economic system has the greatest variety of goods and services

Answer 23

Market economy

Question 24

what is the main reason producers start businesses

Answer 24

Profit motive

Question 25

Market economy

Answer 25

Individuals & businesses make decisions

Question 26

Command economy

Answer 26

Central authority decides what to produce

Question 27

traditional economy

Answer 27

repeat decisions made in earlier times

Question 28

economic goals of america

Answer 28

economic freedom, economic efficiency, economic equity, economic security, full employment, price stability, economic growth

Question 29

3 reasons firms merge

Answer 29

decrease competition, make more efficient, get rid of negative image

Question 30

“there is no such thing as free lunch”

Answer 30

someone always has to pay (production cost)

Question 31

Define Scarcity

Answer 31

short supply (all resources = finite)

Question 32

Define opportunity Cost

Answer 32

Next best alternate

Question 33

Study of human efforts to satisfy unlimited wants with limited resources is known as..

Answer 33

economics

Question 34

4 factors of production

Answer 34

land (natural resources), capital (tools), labor (efforts), Entrepreneurs (owner, combines all 3)

Question 35

Circular flow of economy

Answer 35

factory market, business, product market, individual/households

Question 36

Production possibilities frontier curve

Answer 36

above line - using resources fully with improvements in technology and training

below line - not fully utilizing resources

on line - full utilization

far left/right - more of one product than another

what point is best for beta/alpha - we don’t know, need more info

Question 37

Adam Smith

Answer 37

no gov involvement

Question 38

Karl Marx

Answer 38

total gov involvement

Question 39

John Keynes

Answer 39

some gov involvement

Question 40

Healthy competition results in what kind of prices and quality

Answer 40

lower prices, higher quality

Question 41

define credit utilization

Answer 41

amount of debt on a credit card